UK deals fall to 10-year low in global M&A lull

Michael Bow is a reporter at City A.M. covering private equity, funds, investments and asset managers. He can be reached on michael.bow@cityam.com

Follow Michael

Michael Bow

MERGERS and acquisition activity has plunged into a triple dip recession, led by a fall in UK activity to a decade-long low, new figures show.

China has now overtaken the UK as the second biggest M&A market for the first time, the gloomy figures also show.

Volumes globally fell 12 per cent for the first six months of the year, dipping below the $1 trillion (£663bn) mark for the first time since 2009.

A steeper fall was prevented by growth in the world’s number one deal making market, the US, with values increasing 43 per cent on the previous year.

It is the third time M&A values have fallen into negative growth since the onset of the financial crisis, according to the figures published by Ernst & Young (EY). UK deal values for the first six months of the year fell by 45 per cent, from $75bn to $41bn. The number of deals also fell from 1,279 to 1,014 in the same period.

“It is a corporate conundrum,” head of EY’s transaction advisory services Jon Hughes said. “The fundamentals for M&A across the UK are strong, in terms of cash and credit availability.”

The UK was outpaced by China’s $81bn worth of deals, which paled in significance to US values of $455bn.

Sluggish UK M&A is in contrast to strong growth in the FTSE 100, which is up 13 per cent since this time last year. Problems were mirrored in the Eurozone, where powerhouse economy Germany also saw a big fall in volumes and France, where volumes were down 11 per cent and values five per cent. Dragging deal values into a triple dip were mining and metal firms, which had 22 per cent less deals than a year ago and oil and gas deals, down 18 per cent.

EY chief economist Mark Gregory said the global falls were not without precedent, with both 1996 and 2002 both witnessing similar trends.

“Current UK economic data is also looking increasingly positive, so we may be at another tipping point when M&A activity might increase rapidly and without warning,” he said.